Costco For Millennials: How Chieh Huang Built Boxed, A Mobile Juggernaut With $100M+ In Revenue

When Chieh Huang was growing up in suburban New Jersey, he used to go with his parents to the Price Club every other weekend and buy paper towels and other consumer products in bulk. So when Huang founded Boxed with a few friends in 2013, he wanted to offer the same bulk-sized deals as suburbanites get at Costco, but with the convenience that Millennials demand: mobile ordering and delivery to your doorstep. Since then, Huang, 35 – who sold his first startup, Astro Ape, to gaming giant Zynga – has overseen the New York-based company’s nationwide expansion and astronomical growth. With $133 million in funding from DST Global, GGV Capital and others, Boxed expects revenues to surpass $100 million this year, up from $8 million just two years ago. Those numbers explain why FORBES named Boxed one of the 25 Next Billion-Dollar Startups. I spoke with Huang by phone, and then in late-September he dropped by FORBES’ office, wearing jeans and a checked gray shirt, to talk about what it’s like to sell millions of rolls of toilet paper, why mobile is key, and why he’s setting aside nearly half his stake in the company to fund employees’ college education. What follows is an edited and condensed version of those conversations.

Amy Feldman: Take me back to the beginning.

Chieh Huang: When we left Zynga, we moved into my garage in New Jersey. That was late-2013, and the company started as a national service in 2014, and it took off from there. By the time we moved out of the garage, there was a 40-foot pod in front of my house, and industrial pallets on the driveway, and all the neighbors were like, ‘What the hell is going on?’

Feldman: What was the initial concept?

Huang: I was basically trying to solve a problem that I myself have. I grew up in the burbs, and every other weekend would go to the Price Club, and then I went to the city and didn’t have a car anymore. Am I just supposed to get ripped off?

Feldman: So when you started, you were in the suburbs with a 40-foot pod in front of your house?

Huang: Yeah. [Laughs.] There was a clip of Hoda and Kathie Lee talking about it, and we were like, ‘Okay, we really need to get out of here when the orders come in.’

Feldman: What was the first item you sold?

Huang: Tide pods. The little plastic things, where they premeasure for you. It was shipped to Queens, New York.

Feldman: Were you standing around cheering?

Huang: We’re like ‘Omigosh, someone ordered something.’ From there we had a few days where we were trying to figure things out. It’s been a pretty crazy ride in less than three years. Now we ship anywhere in the lower 48 from four fulfillment centers.

Huang: In some ways, because entrepreneurs are dreamers. Now I look back on those 36 months, and I’m like, ‘Wow, that really happened.’ [Huang pulls out his laptop to a series of maps showing the spread of Boxed orders starting in the first quarter of 2014.] In the beginning, we’re high-fiving each other, this is a thing. Then Q2 came along, and we started spreading across the Midwest. In Q3 we tracked the dispersion of the U.S. population. We’re not taking customers away from Costco, and it’s not that people don’t have a car to go to Sam’s Club in Texas. And while consumers know Boxed as a retailer, a large portion of our business, and the fastest-growing portion of our business, is B2B. The FORBES office is probably not ordering all the coffee and snacks from Amazon.

Feldman: Didn’t Costco and Sam’s Club have websites?

Huang: Yes, they did, but there's only a tiny overlap with what's available in-store. It's virtually impossible to replicate your in-store shop online.

Feldman: How did you fund the business?

Huang: We raised $1.1 million in August 2013. In general, folks were like, ‘Okay, crazy idea, not what we would do, but here’s a small check and go figure it out.’ We were able to figure it out because our first company had a good outcome. We’ve raised a little under $150 million since then.

Boxed has become a mobile juggernaut selling vast quantities of toilet paper and paper towels. (Photo courtesy of Boxed.)

Feldman: At what point did you realize what you’d created?

Huang: Mid-2014. By that time, it was spreading and we were barely keeping up, just making sure everyone was getting their packages on time. There’s a vestige of our past we’ve never lost. Everyone starts in the fulfillment center. As we were treading water, sometimes we would sound these all-hands alarms and everyone from the office would go to the fulfillment center.

Feldman: You would go yourself?

Huang: Everyone. We would sound the alarm, and rent a van. Every person who starts at Boxed does shifts at the fulfillment center. It doesn’t matter if you are the general counsel or the COO. You line up for your morning shift. It allows us to maintain the culture that we are one big team whether you are in an office in New York or Silicon Valley or a warehouse in Vegas.

Feldman: How often do you go to the warehouse?

Huang: Once a week. I’m not on the line much anymore, but I can still pack a box pretty quickly.

Huang: Our average order has 10 items. Most online orders have one or two so you can just visually look at it and grab the right box. For us, it’s a huge problem. How do you Tetris those 10 items into a box? We buy flat cardboard and cut and score it. It is literally the smallest box that can be used to fulfill that order.

Feldman: And you’re opening a new fulfillment center in New Jersey?

Huang: We’ve got a flagship one opening in New Jersey, with full robotics. I just got the keys to it. There’s a roundabout where the Garden State Parkway meets I-78 that used to be a dairy plant. It’s right under 150,000 square feet.

Feldman: How much did it cost, and what will it allow you to do?

Huang: It will be one of the most efficient and advanced, consumer products goods-focused facilities in the world. It is all custom-built. We aren't able to disclose cost, but it cost a lot more than my garage.

Feldman: What’s the potential for Boxed?

Huang: With all this money raised, the expectations are even higher. Retailers are one by one taking notice that this online thing is not going to go away. Consumer packaged good is one of the biggest drivers of the economy, and it is only 1.5% online. How crazy is that? The three warehouse clubs will generate $200 billion combined, 2% of it online and zero percent on mobile. I cannot find a larger consumer-facing industry with zero mobile.

Feldman: What do you think of Walmart’s acquisition of Jet?

Huang: I think it’s actually great for us. It showed that the industry is real and it’s here to stay, with the elephant in the room, which is Walmart, making a huge, gigantic move.

Feldman: Do you think it will work?

Huang: I don’t know. I’m on the edge of my seat to see if it will.

Feldman: Does Walgreens shutting down Drugstore.com have any impact?

Huang: That would be a tailwind for us. That one is mindboggling to me. No one thought of it five years ago when they bought it? I feel like someone must have won internally.

Feldman: What’s your background?

Huang: We were really poor growing up. I spent time in Columbus and later in Baltimore. It was tough times in Ohio when we lived there. My dad was between unemployed and just selling random knickknacks at a flea market. My mom was a cashier at a Chinese food restaurant. They both had awesome careers back in Taiwan, and they came here for my sister and I.

Feldman: Wow, that’s tough.

Huang: It was. We bounced around, and ended up in New Jersey, and have been in central Jersey since then. [When we lived in Baltimore] my mom worked at this Chinese restaurant near Johns Hopkins University, and she would always say, ‘We have to do what we can as a family to get your kids to go to Hopkins.’ She thought there was no way we would be able to go. I was able to go to Hopkins, and graduated in 2003. I ended up in a government-sponsored program to teach English in the Japanese countryside. I felt like I was wasting my life. I came back to law school and ended up becoming a corporate attorney.

Feldman: How did you go from corporate attorney to entrepreneur?

Huang: I got this call from folks I knew who said, ‘Hey you know this thing called the iPhone that came out? We want to make games for it. We’re going to quit our jobs and do it. Do you want to quit yours?’ I thought, ‘I’m not cut out to be a corporate attorney, so why not?’

Feldman: How much did you sell Astro Ape to Zynga for?

Huang: Eight figures. It was a very good result.

Feldman: How much did you make?

Huang: Enough not to worry about money anymore and pursue my passion, which was something else.

Huang: Going into our fulfillment centers brought back memories of how my parents struggled. I go to a fulfillment center, like the one we opened in Atlanta, and most people can’t afford a car. Some CEOs would say, ‘Oh, that’s capitalism.’ That’s not the kind of person I am and not the kind of team I want to build. I realized that education has been so transformative in my family’s life. I just thought, let’s do something. If we have a liquidity event, a large portion of my stake in the company is set aside of that. It’s a little under half the way we have been calculating it. I’m just a regular dude from New Jersey. If Boxed is successful, and you take 90% of my money away, I’ll still be all right.

Feldman: So you told the whole company that nearly 50% of your net worth will go to that?

Huang: [Nodding] There were a few tears. I gathered everyone in a room and just told them, ‘We’re in this together. Let’s make this thing successful so we can all be successful.’

Feldman: How does it work? Who gets the money, and how much?

Huang: The children of all full-time employees are eligible. We cover full undergraduate tuition, not housing, for either private or public college education, and there is no limit on that tuition cost.

Feldman: How many people work at Boxed now?

Huang: About 400. We just crossed 150 for fulltime employees, including non-hourly pick-and-pack.

Feldman: So is it turning out to be Millennials who are using Boxed?

Huang: We’re 81% between the ages of 25 and 44. When you look at the mainstream warehouse clubs they are boomers and seniors. It’s a new audience.

Feldman: What’s the biggest seller?

Huang: Paper products, toilet paper and paper towels.

Feldman: What’s the company’s valuation now?

Huang: It’s still sub-$1 billion. We don’t chase the private round valuations. No one benefits from that other than the founder’s ego.

Feldman: Would you want to go public?

Huang: I would love to. A big investor told me, ‘If you guys aren’t doing a few billion by the time 2020 rolls around, you really messed this up.’ Wow, that fires me up. But talk about setting the bar high. It’s a lot of pressure.

Feldman: How has it been for your parents to see you succeed?

Huang: Parents will be parents. Even now my mom asks me sometimes, ‘When are you going to go back and get a real job?’

I head up Forbes' manufacturing coverage, and write about manufacturing, industrial innovation and consumer products. I previously spent two years on the Forbes' Entrepreneurs team. It's my second stint here: I learned the ropes of business journalism under Forbes legendary...